David Eugene Edwards and Pascal Humbert formed 16 Horsepower in 1992 in Los Angeles, California, where they had met building movie sets for Roger Corman's Hollywood Studios. Friend, co-worker and trained jazz drummer Jean-Yves Tola joined shortly after. The trio performed once as Horsepower before they parted ways with Humbert as Edwards and Tola re-located to Denver, Colorado.

In Edwards's hometown of Denver, the band once again became a trio with the addition of Keven Soll, a luthier and accomplished double bass player. Frustrated by misconceptions about the name Horsepower being related to heroin and inspired by a traditional American folk song about sixteen horses pulling the coffin of a beloved to the graveyard, the name was changed to 16 Horsepower. The band spent the following years rehearsing and gaining a reputation for their intense live performances while touring extensively across North America and eventually they released a seven-inch single, "Shametown", in 1994 on Ricochet Records. By this time they had gained the attention of A&M Records, and recording of Sackcloth 'n' Ashes began in 1995. For various reasons A&M decided to postpone the release of the album, and so the band returned to the studio and recorded their eponymous debut EP which was released the same year.

The debut full-length studio album Sackcloth 'n' Ashes was eventually released in 1996, garnering praise from the international music press. At this time Pascal Humbert had re-located to Denver and joined the band as a second guitarist, although his primary instrument is the bass. Following differences about the musical direction, Soll was asked to leave and was replaced by Rob Redick, later known as the bassist for Candlebox. Redick did not last long because of what the band has referred to as "kind of a mutual unhappiness", and Humbert took over the bass duties. Jeffrey-Paul Norlander joined on second guitar shortly before recording began on the second album, Low Estate, with John Parish as producer. Edwards and Norlander had previously been in several bands together, most notably The Denver Gentlemen.

Norlander departed in 1998 and was replaced by Steve Taylor, the band's guitar technician, who had already been performing on a handful of songs on the bands European tour in 1996.

Spending two years touring and writing new material, 16 Horsepower's third full-length album Secret South was not recorded and released until 2000. The album marked a distinct change in sound and tone from earlier releases as the up-tempo rock influences had all but vanished completely and left room for a more melodic folk-inspired sound. A planned European tour during the summer of 2001 was canceled because of what seemed like internal conflicts within the band, and rumours of a break-up began to circulate shortly after. This rumour was further fueled by the fact that the band members had begun to focus on solo and side-projects. Humbert had released his solo-debut with his project Lilium the previous year and Edwards had begun recording and performing live with his new project Woven Hand.

16 Horsepower, short of Steve Taylor, returned in 2002 with Folklore. As hinted by the title, this fourth studio album took the band further into traditional folk territory and featured only four original 16 Horsepower compositions. While the band went on several tours in support of the album, their creative output was focused on Woven Hand and Lilium, Tola having also joined the latter. Olden, a compilation of previously unreleased versions of early material was released in 2003. This release was supported by a tour in early 2004, including their first US dates in three years, featuring a set split between early material and Folklore-era songs. In April 2005 the band announced their official break-up, as a result of personal, political and spiritual differences as well as finding the constant touring incompatible with their daily lives.

Alternative Tentacles Records, a San Francisco-based record label run by former Dead Kennedys frontman Jello Biafra absorbed American distribution of the band's latter records shortly before their breakup. Since the band's demise, the label has released two DVD-format retrospectives, and in 2008 released a two-CD set Live March 2001. Humbert joined Woven Hand in 2007.